What Are Passive Incomes?
Receiving a steady income with little to no effort is what’s called passive income. This might sound like a fantasy, but it is a reality for many financially savvy individuals. There are a variety of ways to create passive incomes in this day and age. This list contains the top 5 best passive income strategies to start in 2020.
What are the 5 best passive income ideas?
1. Stock Market
There are two main ways you can make money investing in the stock market, share price growth and dividend payouts.
Share price growth is when you buy shares of a specific company or a mutual fund, and the value of your shares increases. Therefore, you can sell your shares and keep the profits. However, if the share price decreases and you sell, you will have to bear the loss. This is why you should do intense research before investing in any company or fund.
On the other hand, dividend payouts are small rewards that some companies give to their shareholders as a thank you. Dividends are small percentage payments based on how many shares you own as a bonus for investing in their company. Although, the dividend payout percentage does vary between companies, and not all companies offer them.
The historically proven strategy to produce the best and most consistent percentage return is buying shares in a diversified fund. The fund will encompass a large portion of the economy and holding that investment long-term. The reason this strategy has proven successful is because of diversification and long-term holding. It is normal for the economy to struggle and temporarily produce negative returns. However, holding through bear markets (a consistent downward trend) has always led to massive recoveries and new all-time highs. For example, the S&P 500 (a well know index fund), on average, has produced an annual 10% return on investment when held long term.
Whether you are looking to invest in individual companies or mutual funds, the stock market can be a great place to put your money to work. With due diligence and a sound investing strategy, stocks can be a great way to earn passive income.
The reality about starting a business is that they are typically laborious, risky, expensive, and time-intensive. Nevertheless, turning a functioning business into a self-sustaining system can become an extremely lucrative passive income stream. Whether your business is selling a product, providing a physical service, producing virtual content, etc., the idea of minimizing your effort yet maintaining growth and revenue is very feasible. For example, hiring management or virtual assistants can relieve enormous pressure and free up your time. Account for the employee’s salary expense that you put in place to run your business and ensure that you will remain profitable. This passive structure will allow you to step away from your business but maintain its productivity.
Creating a self-sustaining business is one of the best ways to create consistent passive income that can last generations. In addition, once your business can successfully function as a system without your daily input, it becomes easier to replicate and expand it.
3. Real Estate
There are numerous strategies to make money in real estate, such as flipping single-family homes, renting out commercial properties, renting multifamily homes, etc. One strategy that historically has proven to be one of the most efficient passive income sources is buying residential properties and renting them out. Of course, an initial effort is required to find a good deal on a property and trustworthy tenets. However, once this is completed, three potential passive income streams can come from a single property.
The first and most obvious is the rental payments. You will require the tenant to pay monthly rent, which will be higher than the monthly mortgage cost. This will result in steady passive income every month so long as your property is not vacant.
The second stream comes from appreciation which is when a property increases in value. Typically, the inflation rate in the United States Of America is near 2% every year. So consequentially, the cost of everything will increase at a similar rate. Meaning on average, every year you own a house, it will increase in value. Although this income is less liquid than rental payments, it should still be viewed as a serious passive income source.
The third form of making money passively from the same property is the idea that besides the upfront down payment, a tenet will be paying down your mortgage, essentially slowly buying the house for you. With these three passive income streams combined, you can understand why real estate investing is a powerful passive income source.
YouTube is a unique platform where anyone can create content in video format and potentially make money. The content ranges from education, entertainment, music, etc. However, the process of creating a channel and building an audience is no easy task. This typically requires an investment in equipment, constant uploads, and quality editing.
The revenue you can make from uploading videos comes from advertisements or paid product placements. The amount you can receive varies depending on the video’s views. The passive income aspect of YouTube is present when a video has the ability to stay relevant for a significant length of time. This will bring in monetized income even after you originally posted it. If you can master YouTube’s algorithm, you can unlock a passive income stream from videos you’ve posted that continue to get views and attention for years to come.
Blogs function similarly to YouTube in how content that is published today can stay relevant and continue to be monetized years later. However, Blogs are not in video format and aren’t posted on a single well-known platform.
Typically you have to purchase a domain name, create a website surrounding a specific topic, edit the theme, add photos, publish content, etc. After the website has been created, you will have to drive traffic to your site. You can do this by publishing content consistently and understanding algorithms such as Google SEO (Search Engine Optimization). This will increase the number of people visiting your site and allow you to monetize your blog. You can monetize websites in a few ways, such as affiliate marketing, advertisements, email marketing, selling courses or books, etc. Once a blog is being monetized, you can enjoy the passive income stream that stems from the viewership of previous posts.